The Union Cabinet ratified another economy booster to revive the growth momentum. This time, the FDI norms in sectors including the decisive contract manufacturing sector has been liberalized.

FDI liberalization in contract manufacturing

As per the new policy, 100 per cent FDI is now allowed for contract manufacturing and this has been made under the automatic route. Encouraging contract manufacturing is expected to give more scope for India based firms to supply components to global markets.

In the context of the US-China trade war, several China based companies are shifting to other locations to avoid Trump’s fury.

“Manufacturing through contract contributes equally to the objective of Make in India” – the official statement about the new FDI regulations observed.

Domestic sourcing norms for single brand retail liberalized

As per the current FDI policy, firms having over 51% FDI have to procure 30% of value of their goods from India; which is known as local sourcing requirement.

The new FDI regulations says that all all procurement made from India by the single brand firm shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported.

Similarly, sourcing of goods from India for global operations can be done directly by the entity undertaking single-brand retail or its group companies (resident or non-resident), or indirectly by them through a third party.

The FDI policy also brings incentives to encourage exports by single brand retailers. Here, the current cap of considering five-year export time frame for single brand retailers also has been removed.

Another concession given to the single brand retailers with FDI is that they are allowed to sell products online even before setting up physical stores in India.

FDI liberalisation in digital media

The FDI rules in digital media also has been liberalised. Here, the new policy brings FDI norms digital media in line with print media. As per the new regulations, FDI up to 26% is allowed for uploading/streaming of news and current affairs through digital media.

In addition to these changes, the new policy also notified the budget decision to allow 100% FDI in insurance intermediaries.


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